We recently posted an article about extending credit and given the importance of the topic and some more really good advice we found here we thought we would give the topic another pass.
Many businesses are forced to offer credit to their customers because this has become standard practice across so many industries. This is especially true for a seller that is working with larger companies and that has competitors that are themselves undertaking the practice. If a company can get free financing for a month from one vendor for a product that can be found from multiple vendors then that company is going to win most of the business that is out there to be had. The reason being, extending credit improves the cashflow of the buyer, especially when that credit is interest free, which is the case for an invoice with Net 30/60/90 terms.
If you find yourself in this situation and you need to extend your payment terms there are some helpful ways to ensure that you will get paid; “the only thing worse than losing a sale is making the sale and not getting paid for it”. We recommend running a credit check on the company. Unlike consumer credit reports, you do not need permission to run such a report. There are a bunch of companies out there that offer this service including Dun & Bradstreet, Experian and Ansonia. Though imperfect, this will give you a snapshot of the credit quality of the company and their payment history. Are their Day Payables Outstanding (DPO) showing improvement or deteriorating? Have they made good on large payments in the past?
Take some time to do a little research on the web as well to discern if this company is honest. Job boards that have feedback from current and previous employees can be a good place to look. You can also find reviews from customers. If a company treats their employees and customers a certain way, you can probably guess how they will treat their vendors.
Payplant provides growth financing for entrepreneurs, by entrepreneurs. Its Pay Me NowTM digital invoice-financing service provides cash to businesses when their customers pay too slowly. Payplant helps businesses with PO and Invoice Financing, Asset Based Lending, Term Loans and Customer Financing products. Payplant works with companies that don’t currently qualify for traditional bank financing, have grown too quickly for their current lender or are at the point in their evolution where an influx of working capital can elevate their business to achieve rapid growth. Payplant delivers fast and reliable funding, at very attractive rates and is completely on demand. For more information, visit www.payplant.com.